Using Philosophical and Economic analysis to consider big questions, world issues and matters of everyday life!

Saturday, 8 July 2017

Econocracy? More Like Idiocracy!

On Newsnight
last night, there was an interview with an economics student called Joe Earle,
who has co-authored a book entitled Econocracy
(article link below) that has gone on to create a new student movement that looks to challenge how economics is supposedly out of
touch with reality and defined by the views of the elite.

The founders
of Econocracy, as the title suggests,
want to make economics less about the wisdom of economists and more about the
views and beliefs of our democratic nation. By making their discipline
all-pervasive, the author argues that economists have turned the subject of economics into too
much of a scientific discipline in a way that apparently undermines the
democratisation of economic viewpoints:

“We live in a nation divided between a
minority who feel they own the language of economics and a majority who don’t. As
Ed Miliband and Jeremy Corbyn have found, suggest policies that challenge the
narrow orthodoxy and you will be branded an economic illiterate. Academics who
follow different schools of economic thought are often exiled from the big
faculties and journals."

Alas, the book's authors and the reviewer in The Guardian do not really
understand what is actually happening, and this is because they are missing the
most important point - that despite highly charged protestations, most people
really are very unapprised of even the basics of economics, and it is only
because their views are subjected to rigorous analytical and empirical scrutiny
that they find themselves on the periphery of rational enquiry.

To give you a fourfold
and very topical example, in recent times we've seen evidence presented that
tuition fees do not reduce the number of working class students (as Jeremy Corbyn
claims); that Corbyn's favoured living wage increase has been shown in Seattle
to engender all the negative outcomes economists have been warning about for
decades; that Corbyn's favoured increase of corporation tax has been shown to
be a simple sideways transfer of costs picked up by staff and by consumers and
being unbeneficial to those struggling; and worst of all, that Corbyn's fairly
recent praise for Venezuelan socialism and his desire for Britain and America
to adopt that model as a 'rejection of neo-liberalism' is without question one
of the most foolish and dangerous assertions any modern politician has made.

Now, if Corbyn
and his cult of personality acolytes were in any way friendly to empirical
evidence - that is, open to what is actually true and factual about the
consequences of their views - they would humbly repudiate those four false
beliefs, and honestly declare that a rethink of their position is necessary.
But you just know that is not going to happen, because what these people care
about is not what is true and factual, it is what best serves their own
interests.

Of course, economics
didn't need those four evidential examples to feel vindicated - this is what
economists have been arguing for decades, and this is what the Econocracy crew do not get - economics
is not for the elite because it is elitist, it merely appears to be for an
elite group because that group contains a relatively small proportion of
society's individuals that actually care about the truth and understand the
evidence and logic to arrive there.

So when the
author says “We live in a nation divided
between a minority who feel they own the language of economics and a majority
who don’t.", well yes, we do, but that is not really any different
from a pastor in a predominantly young earth creationist church saying we have
a few evolutionists in this church who feel they own the language of biology in
a majority church congregation that don't. Quite! If you marginalise yourself
by believing foolish, counterfactual things, expect to find yourself
marginalised from the mainstream.

That is also why,
when the author says "As Ed Miliband
and Jeremy Corbyn have found, suggest policies that challenge the narrow
orthodoxy and you will be branded an economic illiterate" - well
again, yes, if you publically hold beliefs that are economically illiterate you
will be branded an economic illiterate, just as if you go around breaking
people's garden fences, plant pots and car wing mirrors, you will be branded a
vandal. If the cap fits, and it has your name on it, you are going to find a
lot of people asking you to wear it.

Economics as a science

Economics is
scientific, so it is only democratic to the extent that people value evidence
or don't value evidence. Economics is about human preferences and behaviour
played out in the form of mathematics. Therefore although it falls into the
category of soft science, it is an empirical science nonetheless. For example,
indifference curves represent a series of combinations between two different
economic goods, and they play out in geometrical terms when slopes of
indifference curves on a graph reflect marginal value. Economics is a proper
empirical method for assessing what humans prefer given many combinations of
goods.

If this
process is interfered with in a way that imposes unnecessary costs on
individuals that know their own preferences more than politicians, then economists
understand in advance why the ill-effects of scrapping tuition fees, the
Seattle-effects of raising the minimum wage, and the consumer-effects of
increased corporation tax culminate in undesirable outcomes.

Try chemistry as
an illustration. Chemistry is a noble science, and one which returns reliable
and consistent empirical data. The main reason for this is that natural laws
that underpin the material constituents are not compromised or retarded through
human interference. When considering gaseous compounds, the masses of one
constituent that combine with a fixed mass of the other constituent are in the
ratio of (small) integers to each other. But, if
scientists interfered in this law so that it was no longer obeyed by all gas
mixtures, the fundamental constituents of chemistry would be undermined.

This
applies pretty neatly to economics as well, at least to the greatest degree.
Economics resembles science in that its truths are based on empirical
observations and patterns distilled from data. If we treated economics as
rigorously as we did chemistry we would find one of the golden rules of
economics - the fundamental principle of least resistance (otherwise known as
maximum efficiency) - playing out much more prominently, and economic growth
happening even more readily.

The upshot it, the only way that the Econocracy movement is going to get its wish for a more ubiquitously democratic economic discipline is when there is a more ubiquitously informed society. Economics is a bit like string theory in that only a relatively small proportion of society understand it. The main difference though is that with string theory most laypeople do not go around opining as though they are experts in the subject.

About Me

This is the Blog of James Knight - a keen philosophical commentator on many subjects.
My primary areas of interest are: philosophy, economics, politics, mathematics, physics, biology, chemistry, theology, psychology, history, the arts and social commentary.
I also contribute articles to the Adam Smith Institute and the Institute of Economics Affairs.
Hope you enjoy this blog! Always happy to hear from old friends and new!
Email:j.knight423@btinternet.com